And that seems to be just the tip of the iceberg. Others will follow suit, downsizing their fleets, laying off personnel, and cutting overhead costs significantly in an effort to preserve cash following the implosion of global passenger traffic in Covid-19 times.
Emirates (EK) and Lufthansa (LH) show in which direction intercontinental airlines are moving; from large to lean. The industry, which has been accustomed to success since years, is now having to
tighten its belt and bring its business models and organizational structures in line with the new reality.
In Dubai, Emirates Airlines slashed thousands of jobs, with 600 pilots including those usually manning the flight decks of EK’s large A380 fleet and roughly 7,000 cabin crew were let go.
A380s will stay on the ground
In the meantime, EK confirmed that the period of reduced pay for its staff will be extended for another three months till September. It had previously reduced basic wages by 25%-50% for three months starting from April, with junior employees being exempt.
Emirates has around 60,000 people standing on its payroll.
In a first reaction to the job cuts, Dubai’s government said it is willing to financially support Emirates which fell victim to the global travel restrictions put in place to attempt to stop the Covid-19 spread. Meanwhile, EK President, Tim Clark, said that the A380s will be kept on the ground until a coronavirus vaccine is available.
Emirates is the largest global A380 operator with 115 units belonging to its fleet.
Lufthansa may ax up to 26,000 jobs
At Lufthansa, deep cuts in personnel costs are imminent. The slump in passenger air traffic is leading to an even higher personnel surplus than previously expected. Following the coronavirus crisis, the airline group (LH, SN, OS, LX, EW) will require between 22,000 and 26,000 fewer employees than today in order to enable a restart of operations and become competitive on the cost side, Lufthansa declared on Wednesday, after consultations with two cabin unions and the pilot association. Until now, there was only talk of about 10,000 jobs being cut from a global workforce of 138,000.
In order to lay off as few employees as possible, however, personnel costs would have to be reduced significantly beginning today, Lufthansa Executive Board Member for Human Resources, Michael Niggemann, stated, pointing at stiff austerity measures needing to be implemented.
High noon on 25JUN20
The company intends to reach agreements with the unions on personnel cost reductions by 25JUN20. At noon on that day, an Extraordinary General Meeting of the airline’s shareholders will take place, aimed at okaying the stabilization package of up to 9 billion euros negotiated between the Lufthansa management and government representatives. A savings contribution consented to by all parties involved, is the precondition to getting the okay of the shareholders for Lufthansa’s rescue package. In particular, the shareholders should agree to a capital increase of 25%, so that the state will have a 20% share in the listed company.
Thousands of jobs are also at stake at Lufthansa’s subsidiaries: Swiss, Austrian, Eurowings, and Brussels Airlines. According to local media, up to 1,900 jobs will be cut at Swiss, while Austrian and Brussels Airlines each need to cut about 1,000 jobs. Figures for Eurowings are not available yet.
Lufthansa Cargo stays calm
Lufthansa Cargo does not seem to be hit by any job cuts. The carrier’s freight subsidiary (100%) is already very lean, leaving little room for further employee reductions. Moreover, Lufthansa Cargo became the Group’s flagship during the Covid-19 crisis, ensuring the constant supply of China produced medical items and hygienic articles to Europeans.
Latest rumors suggesting Lufthansa’s intentions to sell some of the Group’s subsidiaries to optimize finances also bounce off the cargo daughter. This, because Lufthansa’s entire cargo business only works smoothly if the market is offered both main deck (freighters) and lower deck transport capacities (passenger aircraft) within a globally operated and fine-tuned network. Seen in this light, the sale of the cargo subsidiary to a financial investor or any other interested party, as mentioned in some speculations, would make no sense from a Group perspective.
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